Sal ado , Ba ios; Fo is, Delis; Mikel, Landabaso
Wo king Pape
The ax sys em penalizes he g ow h o new and small
businesses in he EU
JRC Wo king Pape s on Taxa ion and S uc u al Re o ms, No. 07/2024
P o ided in Coope a ion wi h:
Join Resea ch Cen e (JRC), Eu opean Commission
Sugges ed Ci a ion: Sal ado , Ba ios; Fo is, Delis; Mikel, Landabaso (2024) : The ax sys em penalizes
he g ow h o new and small businesses in he EU, JRC Wo king Pape s on Taxa ion and S uc u al
Re o ms, No. 07/2024, Eu opean Commission, Join Resea ch Cen e (JRC), Se ille
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2024
Ba ios, S., Delis, F., Landabaso Al a ez, M.
JRC Wo king Pape s on Taxa ion and S uc u al Re o ms No 07/2024
The ax sys em penalizes he g ow h o
new and small businesses in he EU
This publica ion is a epo by he Join Resea ch Cen e (JRC), he Eu opean Commission’s science and knowledge se ice. I aims o
p o ide e idence-based scien i ic suppo o he Eu opean policymaking p ocess. The con en s o his publica ion do no necessa ily
e lec he posi ion o opinion o he Eu opean Commission. Nei he he Eu opean Commission no any pe son ac ing on behal o he
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Con ac in o ma ion
Name: Fo is Delis
Add ess: Edi icio EXPO, C/ Inca Ga cilaso, 3, E-41092 Se ille/Spain.
Email: o ios.[email p o ec ed]a.eu
EU Science Hub
h ps://join - esea ch-cen e.ec.eu opa.eu
JRC138855
Se ille : Eu opean Commission, 2024
© Eu opean Union, 2024
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How o ci e his epo : Eu opean Commission, Join Resea ch Cen e, Ba ios, S., Delis, F. and Landabaso Al a ez, M., The ax sys em
penalizes he g ow h o new and small businesses in he EU, Eu opean Commission, Se ille, 2024, JRC138855..
1
Con en s
Abs ac ....................................................................................................................................................................................................................................................................... 2
Acknowledgemen s .......................................................................................................................................................................................................................................... 3
Execu i e summa y .......................................................................................................................................................................................................................................... 4
1 In oduc ion and policy con ex ................................................................................................................................................................................................... 5
2 Da a and indings ..................................................................................................................................................................................................................................... 7
2.1 E ec i e axa ion and i m size .................................................................................................................................................................................... 7
2.2 E ec i e axa ion, i m size and i m g ow h ................................................................................................................................................... 9
3 The case o he 2015 co po a e ax e o m in Spain ......................................................................................................................................... 14
4 Summa y and conclusion ............................................................................................................................................................................................................... 16
Re e ences ............................................................................................................................................................................................................................................................. 17
Lis o abb e ia ions and de ini ions ........................................................................................................................................................................................... 25
Lis o ables ........................................................................................................................................................................................................................................................ 26
Lis o igu es ..................................................................................................................................................................................................................................................... 27
2
Abs ac
We p o ide e idence on he di e ences in he e ec i e ax a e by i m size, highligh ing ha e ec i e ax
a es end o ollow a bump-shaped cu e, inc easing om mic o o small i ms and hen dec easing o
medium o la ge i ms. Ou analysis, based on mic oda a om se e al EU coun ies, shows ha bo h
co po a e and labou axa ion ollow his pa e n. Econome ic analysis e eals ha a 1% inc ease in e ec i e
co po a e axa ion esul s in a 2.6% dec ease in i m u no e g ow h, wi h new i ms and mic o i ms being
pa icula ly a ec ed. The nega i e impac o co po a e axa ion on i m g ow h is much la ge o new i ms
compa ed o olde i ms, and his is especially p onounced in Spain, whe e a 1% ax hike leads o a u no e
g ow h dec ease o 8%. Examining he 2015 Spanish co po a e ax educ ion o new i ms, we ind ha he
e o m's o e all posi i e impac was insigni ican o mic o i ms, sugges ing he need o mo e a ge ed
policies conside ing i m size, age, and owne ship.
3
Acknowledgemen s
We a e g a e ul o commen s om Ana Agúndez, Lidia B un Ca asco, Paolo Can o a, Fe nando He ás,
Dimi is Ky iakou, F ank Nehe , Giuseppe Pi oli, Ra ael Spei mann, And zej S asio, Johan S ie na and Daniel
S oehlke . We a e especially g a e ul o And ea Papini o his help wi h he EUROMOD simula ions.
Au ho s
Ba ios Sal ado
Delis Fo is (co esponding au ho )
Landabaso Mikel
4
Execu i e summa y
This s udy p o ides desc ip i e e idence on he di e ences in e ec i e ax a es by i m size, ocusing on
co po a e and labou axa ion ac oss nine EU coun ies: Belgium, Spain, F ance, C oa ia, I aly, Poland, Po ugal,
Romania, and Slo akia. Fu he , i analyses he impac o e ec i e co po a e axa ion on i m-le el u no e
g ow h using econome ic analysis and examines a speci ic case o ax e o m implemen ed in Spain. I o e s
an analy ical amewo k o e alua e ax bu dens speci ically o new and mic o i ms.
Policy Con ex
Small businesses ep esen he la ges sha e o o al employmen in he EU, playing a key ole in p omo ing
g ow h and inno a ion, especially du ing pe iods o deep and apid s uc u al and echnological changes, such
as he ongoing g een and digi al ansi ions. Go e nmen s o en adop p e e en ial ax schemes o encou age
new business c ea ion, gi en ha exis ing ax s uc u es, pa icula ly in EU coun ies cha ac e ized by high ax
bu dens, may hampe hei de elopmen po en ial. Agains his backg ound, one could a gue ha policy
e o ms need o add ess he ax disad an ages aced by small i ms o encou age g ow h and inno a ion. Ye ,
exis ing e idence sugges s ha he ax bu den is unequally dis ibu ed depending on i m size. Recen s udies
ha e p o ided subs an ial e idence on he ax ad an ages o la ge mul ina ional co po a ions, which exploi
he loopholes o he in e na ional ax sys em, some hing SMEs canno bene i om. Addi ionally, ce ain
ea u es o he ax sys em may inhe en ly disad an age small businesses ela i e o la ge en e p ises, such
as he asymme ic ea men o p o i s and losses, a bias owa ds deb o e equi y, and highe compa a i e
cos s ela ed o ax compliance. This en i onmen aises ques ions abou whe he SMEs, pa icula ly mic o
and small i ms, a e a a compe i i e disad an age, as hey o en canno employ he ax s a egies a ailable
o la ge mul ina ionals due o hei size and domes ic ocus. O e he pas decade, discussions and policy
ini ia i es ha e aimed a simpli ying ax ules and educing compliance cos s o i ms, especially SMEs.
Despi e educed ax a es and incen i es o mic o and new i ms, e idence on how hese incen i es a ec
hei g ow h is limi ed.
Analysis
This pape p o ides e idence on how e ec i e ax a es change depending on i m size and how co po a e
e ec i e ax a es impac i ms' g ow h. A composi e e ec i e ax a e, complemen ing co po a e e ec i e
ax a es wi h social secu i y con ibu ions paid by employe s used as p oxy o labou axes, is cons uc ed
and analysed desc ip i ely. An econome ic analysis o he impac o co po a e e ec i e ax a es on i m
g ow h is conduc ed. To examine he policy implica ions, he s udy conside s he speci ic case o he Spanish
co po a e ax educ ion o new i ms adop ed in 2015, using an e en analysis.
Main Findings
Ou esul s sugges he exis ence o a bump-shaped cu e in e ec i e ax a es, whe e such a es end o
inc ease om mic o o small i m size bu hen dec ease o medium o la ge i ms. This pa e n holds when
conside ing ei he co po a e axa ion alone o bo h co po a e and labou axa ion oge he . Ou econome ic
analysis indica es ha a 1% inc ease in e ec i e co po a e axa ion leads o a 2.6% dec ease in i m
u no e g ow h on a e age. The nega i e impac is much la ge o new i ms (4.1%) and is especially
p onounced in Spain, whe e a 1% ax hike leads o an 8% dec ease in u no e g ow h o new i ms, ollowed
by I aly and Belgium, wi h a co esponding 5% dec ease. Mic o i ms a e he mos sensi i e o he co po a e
e ec i e ax bu den, pa icula ly in Sou he n EU coun ies, including Spain, I aly, Po ugal, and Romania. We
conside mo e speci ically he Spanish case gi en he adop ion in 2015 o ax e o ms aimed a suppo ing
new i ms h ough educed co po a e income ax a es. Fi s , ou desc ip i e indings indica e ha mic o and
small i ms ha e expe ienced a signi ican inc ease in hei e ec i e ax bu den, especially a e 2012 and
despi e he adop ion o he 2015 e o m. On he con a y, medium and la ge i ms saw he same indica o
emain ela i ely s able o expe ience a sligh decline du ing he same pe iod. We also analyse he impac o
he 2015 e o m using econome ic analysis. Ou esul s e eal ha he impac o his e o m was posi i e,
albei insigni ican o mic o i ms, cas ing doub on i s e ec i eness. Ou indings highligh he impo ance o
conside ing i m size, age, and owne ship cha ac e is ics in e alua ing he e ec s o ele an ax policy
changes.
5
1 In oduc ion and policy con ex
Recen s udies ha e p o ided subs an ial e idence on he ax ad an age o la ge mul ina ional co po a ions,
which, hanks o hei global business o ganisa ion, allow hem o minimise hei ax bu den by exploi ing he
loopholes inhe en o he in e na ional ax sys em. Such an ad an age is especially salien in he Eu opean
Union (EU) con ex , whe e capi al ci cula es eely while ax ules emain essen ially na ional (see Tø slø e
al., 2023). Fu he mo e, ce ain ea u es o he ax sys em may inhe en ly disad an age small businesses
ela i e o la ge en e p ises, such as he asymme ic ea men o p o i s and losses, a bias owa ds deb
o e equi y, and highe compa a i e cos s ela ed o ax compliance (see OECD, 2015; Eu opean Commission,
2022). To ge a comple e pic u e o he ax bu den aced by small businesses and hei possible disad an age
compa ed o la ge i ms, i is necessa y o also conside labou axa ion, gi en ha small businesses end o
be mo e labou in ensi e han la ge i ms (see Kuma e al.,1999).
O e he pas decade, discussions and policy ini ia i es aimed a simpli ying ax ules and educing
compliance cos s o i ms, especially SMEs (Small and Medium-sized En e p ises), ha e been ongoing in
Eu ope. Ini ia i es such as he CCCTB (Common Consolida ed Co po a e Tax Base), BEFIT (Business in Eu ope:
F amewo k o Income Taxa ion), and he ecen ly p oposed Head O ice Sys em (HOT) by he Eu opean
Commission o p omo e SMEs´ c oss-bo de ac i i ies a e a he o e on . Addi ionally, he e is heigh ened
sc u iny o e he ax bu den on domes ic i ms compa ed o mul ina ionals, p ima ily ocusing on
mul ina ional ax a oidance and p o i shi ing. The OECD’s Base E osion and P o i Shi ing (BEPS) ini ia i e,
along wi h he June 2021 ag eemen by G7 inance minis e s o es ablish a minimum global co po a e ax
a e o a leas 15%, a e among he key measu es a ge ing hese conce ns. On 1 Janua y 2024, new EU
ules ook e ec , se ing a minimum e ec i e axa ion a e o 15% o mul ina ional companies ac i e in EU
Membe S a es. These ules, unanimously ag eed upon by Membe S a es in 2022, ma k he EU's
implemen a ion o he ‘Pilla 2' ules om he 2021 global deal on in e na ional ax e o m.
1
This en i onmen aises ques ions abou whe he SMEs (mic o and small i ms, in pa icula ) a e a a
compe i i e disad an age, as hey o en canno employ he ax s a egies a ailable o la ge mul ina ionals
due o hei size and/o he domes ic scope o hei ac i i y. Many coun ies o e small en e p ises a ious
o ms o elie o mi iga e hese disad an ages. The co po a e income ax bu den a ies signi ican ly ac oss
Eu ope, wi h SME ax incen i es less common han R&D ax incen i es (Spengel e al., 2015). Typically,
educed ax a es a e used o suppo SMEs, pa icula ly mic o co po a ions. Despi e he incen i es o mic o
and new i ms, e idence on how hese incen i es a ec hei g ow h is limi ed.
This pape p o ides e idence on how e ec i e ax a es change depending on i m size and how
co po a e e ec i e ax a es impac i ms´ g ow h. The e ec i e ax a e ep esen s he ax bu den
e ec i ely paid by i ms, in con as wi h s a u o y ax a es, which do no embed possible educ ions in he
axes paid h ough speci ic ax eba es a ec ing he a e and/o he base. We cons uc a composi e e ec i e
ax a e ha complemen s he co po a e ax bu den wi h he inclusion o social secu i y con ibu ions paid by
employe s which a e used as p oxy o labou axa ion. Ou analysis co e s nine EU coun ies: Belgium, Spain,
F ance, C oa ia, I aly, Poland, Po ugal, Romania, and Slo akia. We use ex ensi e co po a e balance shee da a
om he O bis da abase, encompassing nea ly 4 million i ms, co e ing he yea s 2008-2019, and social
secu i y con ibu ions da a om he EUROMOD mic osimula ion model.
2
We ind e idence o a bump-shaped pa e n o bo h co po a e and composi e e ec i e ax a es (ETRs)
depending on i m size. While mic o i ms end o ace low co po a e ETRs, hey expe ience a sizable inc ease
in hei co po a e ax bu den when ansi ioning om mic o o small size s a us. The composi e ETRs e eal a
di e en pic u e o Spain and I aly, wi h he ax bu den aced by mic o i ms su passing ha aced by la ge
i ms. We u he use he i m-le el a ia ion in co po a e ETRs o analyse hei impac on i ms´ g ow h by
pe o ming econome ic es ima ions. We ind ha a 1% inc ease in co po a e ETRs leads o a 2.6% dec ease
in i m g ow h, which is s a is ically signi ican . Ou econome ic analysis shows ha he g ow h o mic o and
new i ms is signi ican ly and nega i ely impac ed by he co po a e ax bu den hey ace, making hem he
mos sensi i e i m ca ego ies o his bu den. This esul is especially p onounced in Sou he n EU coun ies
such as Spain, I aly, and Po ugal, as well as in Romania.
1
See h ps:// axa ion-cus oms.ec.eu opa.eu/ axa ion-1/co po a e- axa ion/minimum-co po a e- axa ion_en
2
We a e g a e ul o And ea Papini o p o iding he Eu omod da a.
6
SMEs ep esen wo hi d o EU employmen and almos 57% o o al alue added gene a ed by he
non- inancial business sec o , see Eu opean Commission (2022). Thei ole is key in p omo ing g ow h and
inno a ion, especially du ing a pe iod o apid economic ans o ma ion and echnological change
cha ac e izing he ongoing g een and digi al ansi ion. Ye , ou e idence sugges s ha exis ing ax s uc u es
hampe hei po en ial con ibu ion o economic g ow h despi e p e e en ial ax sys ems implemen ed in
many EU coun ies, pa icula ly in he EU pe iphe y. Agains his backg ound, one could a gue ha policy
e o ms need o add ess he ax disad an age aced by small i ms. We conside his ques ion by analysing
he speci ic case o he co po a e ax e o m implemen ed in Spain in 2015, which g an ed a special ax
eba e o newly inco po a ed en i ies ca ying ou business ac i i ies, axed a a a e o 15%, as opposed o
he benchma k co po a e ax a e o 30%. We ind ha while he co po a e ax cu had a a ou able impac
on he g ow h o he a ge ed g oup, his impac emained insigni ican o mic o i ms, indica ing a limi ed
e ec o he policy e o m. This could occu because he ax cu was no su icien and/o because i did no
o e a dis inc i e ad an age o e medium and la ge i ms, gi en he gene al educ ion in he co po a e ax
a e ha ook place a he same ime, dec easing om 30% o 28% in 2015, and om 28% o 25% in 2016.
The es o he pape is o ganised as ollows. Sec ion 2 p o ides de ails on he da a used and an
analysis o he desc ip i e s a is ics and he econome ic es ima ion assessing he impac o e ec i e
axa ion on i ms´ g ow h. Sec ion 3 ocuses on he analysis o he 2015 Spanish ax e o m.
13
Figu e 6. Impac o Co po a e ETR on Fi m g ow h o Mic o Fi ms ac oss Coun ies
Sou ces: Au ho s´ econome ic es ima ions
14
3 The case o he 2015 co po a e ax e o m in Spain
As obse ed in he coun y analysis o new i ms (Figu e 5) and mic o i ms (Figu e 6), he g ow h o
co esponding Spanish i ms appea s o be signi ican ly and nega i ely a ec ed by he co po a e ax bu den
in bo h cases. Analysing he annual ends o co po a e ETRs, social secu i y con ibu ion a es (labou ETRs),
and composi e ETRs in Spain o di e en i m sizes (Figu e 7), we iden i y ha he ela i ely dec easing o
s able pa e ns un il 2012 ac oss i m size gi e way o inc easing pa e ns o co po a e ETRs and social
secu i y con ibu ion a es a e 2012 o mic o and small i ms. Du ing his pe iod, he e ec i e co po a e
ax a e o mic o i ms inc eased by 3.6% (+3.1% o small i ms), and he e ec i e labou ax a e
inc eased by 13% (+6.9% o small i ms). In con as , he pic u e is a he s able o medium i ms, and o
la ge i ms, he co po a e ETRs show a declining end a e 2014.
Figu e 7. Annual T end o Co po a e ETR, Labou ETR and Composi e ETR in Spain
Sou ces: O bis da abase, Eu os a and au ho s´ calcula ions
Spanish ax law o e s se e al incen i es, including educed ax a es o small and medium-sized
i ms based on hei ax base, h oughou ou analysis pe iod. The e is a speci ic e en o new i ms:
e ec i e om 1 Janua y 2015, newly inco po a ed en i ies ca ying ou business ac i i ies a e axed a a a e
o 15% agains a benchma k a e o 28% which was la e educed o 25%, ega dless o he amoun o he
ax base.
8
This educed co po a e ax a e o 15% o new companies applies du ing he i s wo yea s in
which hey achie e p o i s. Howe e , his special ax a e does no apply in ce ain cases, such as newly
c ea ed companies ha a e pa o o con olled by a g oup o companies. This se ing is ideal o an e en
analysis in he o m o a di e ence-in-di e ence model ex ended by an in e ac ion e m o assess he impac
o a change in co po a e e ec i e ax a es on i m g ow h. We de ine an 'e en ' a iable as 1 o yea s a e
and including 2015, indica ing he pos -policy pe iod, and 0 o yea s be o e he policy. A ' ea men ' a iable
8
This incen i e was e ec i e om 1 Janua y 2013, bu wi h di e en h esholds. Newly inco po a ed en i ies engaged in business
ac i i ies we e axed a a a e o 15% on he ax base up o EUR 300,000 and a a 20% a e on he ax base exceeding ha amoun .
15
is 1 o Spanish i ms in hei i s wo p o i able yea s ha a e nei he pa o a domes ic no a mul ina ional
g oup, and 0 o he wise. These a iables a e in e ac ed wi h he co po a e e ec i e ax a e o isola e he
impac on he g ow h o new, independen Spanish i ms ela i e o olde i ms and newly c ea ed i ms ha
a e pa o a company g oup, be o e and a e he policy change. The model speci ically assesses how g ow h
esponses o e ec i e ax a e changes di e o he ea men g oup in he pos -e en pe iod compa ed o
he baseline (con ol g oup be o e he e en ).
In Figu e 8 and Table 7, we obse e he impac o such a policy on i m g ow h. The esul s suppo
ou ini ial indings ha highe co po a e ETRs nega i ely impac i m g ow h and help alle ia e conce ns abou
he endogenei y in ou empi ical analysis, bu wi h nuanced insigh s speci ic o he con ex o new i ms and
policy changes in Spain. Speci ically, he g een line shows ha o he con ol g oup, he nega i e impac o
co po a e ETRs on g ow h (-158.544 in he baseline coe icien in Table 7) becomes mo e p onounced a e
he policy change (indica ed by he do ed g een line and by he in e ac ion e m E en * Co po a e ETR in
Table 7). This sugges s a b oade nega i e e ec o he ax a e on i m g ow h, in ensi ying pos -policy. The
posi i e slope o he ea men g oup sugges s ha he ax a e educ ion had a a ou able impac on he
g ow h o he a ge ed g oup o new, non-mul ina ional i ms in Spain. Howe e , when he ea men g oup is
de ined in he same way bu includes only mic o i ms, he esul s a e s ill posi i e bu become insigni ican
( he coe icien o he iple in e ac ion e m E en * T ea men * Co po a e ETR), indica ing a a he doub ul
ou come o he ax educ ion o mic o i ms. This could happen because he e was also a gene al educ ion in
he co po a e income ax (CIT) a e om 30% o 28% in 2015 (and la e o 25%), ende ing he ax educ ion
o mic o i ms ha belong o he ea men g oup (new and no pa o a company g oup) no p onounced
enough o no su icien ly p o ac ed in ime.
Figu e 8. Impac o Co po a e ETR on Fi m g ow h ( he case o Spain)
Sou ces: Au ho s´ econome ic es ima ions
16
4 Summa y and conclusion
Small i ms (including mic o- i ms and SMEs) a e well-known d i e s and pilla s o economic g ow h
and inno a ion. Small businesses a e he la ges employe s (95% o o al employmen in he EU), and hei
ole is key du ing pe iods o deep s uc u al changes, such as he ongoing g een and digi al ansi ion.
Howe e , small businesses ace speci ic hu dles o hei de elopmen , including on he ax side, which some
coun ies y o add ess by g an ing speci ic ax ad an ages. In his pape , we calcula e he e ec i e ax a e
paid by i ms, which akes in o accoun speci ic ax ad an ages gi en o i ms, including hose ela ed o hei
s a us and size. We calcula e hese a es by i m-size ca ego y o a sample o EU coun ies, conside ing wo
speci ic axes: co po a e income axes (CIT) and social secu i y con ibu ions paid by employe s, which
ep esen labou axes. Fu he , we analyse he impac o e ec i e co po a e axa ion on i m-le el u no e
g ow h using econome ic analysis and examine a speci ic case o ax e o m implemen ed in Spain.
Ou esul s e eal in e es ing pa e ns whe eby he e ec i e ax a es end o ollow a bell-shaped
cu e, inc easing a i s when going om mic o o small i m sizes and hen dec easing again when going
om medium o la ge size companies. A simila pa e n eme ges when conside ing only he e ec i e
co po a e ax a e o bo h e ec i e co po a e axes and labou axes oge he . This pa e n has also been
ound in o he geog aphical a eas, as shown in Bachas e al. (2023), and is, in i sel , no su p ising. On he one
hand, go e nmen s aim o a ou en ep eneu ship and usually g an ax b eaks o new i ms and/o small o
e y small i ms, which can be p og essi ely wi hd awn a e a gi en pe iod o ime o when he i m's ac i i y
eaches a ce ain le el. On he o he hand, e y la ge i ms may be able o minimize hei ax bu den h ough
ax op imiza ion, which can include c oss-bo de ope a ions and he use o ax loopholes h ough mechanisms
such as deb shi ing, ans e p icing, o he loca ion o in angible asse s (e.g., pa en s) in coun ies o e ing
speci ic ax ad an ages. Tax op imiza ion equi es su icien esou ces and speci ic na u es o ac i i y which
a e no a ailable o small companies, as epo ed in he Eu opean Commission (2022).
Ou econome ic analysis indica es ha a 1% inc ease in e ec i e co po a e axa ion leads o a 2.6%
dec ease in i m u no e g ow h on a e age. The nega i e impac is much la ge o new i ms (4.1%) and is
especially p onounced in Spain, whe e a 1% ax hike leads o an 8% dec ease in u no e g ow h o new
i ms, ollowed by I aly and Belgium, wi h a co esponding 5% dec ease. Mic o i ms a e he mos sensi i e o
he co po a e e ec i e ax bu den, pa icula ly in Sou he n EU coun ies, including Spain, I aly, Po ugal, and
Romania.
The bell-shaped cu e o e ec i e axa ion means ha mic o and/o new i ms may ace speci ic
disad an ages when aiming o expand hei ac i i y, which may equi e policy suppo . Ye , public
in e en ions aimed a educing such disad an ages a e no necessa ily success ul, depending on hei design.
We illus a e his by conside ing he speci ic case o he co po a e income ax e o m adop ed by Spain in
2015, which g an ed a educed a e o newly inco po a ed en i ies. Al hough he ax educ ion appea ed
signi ican a i s glance, wi h a empo a y educ ion in he s a u o y ax a e om 30% o 15% while he
gene al a e was educed om 30% o 28% and 25% successi ely, ou esul s indica e ha while he e o m
was posi i e, i s impac was no signi ican and ailed o boos SMEs’ ac i i y du ing he pe iod conside ed.
Complemen a y desc ip i e analysis sugges s ha , despi e he speci ic ax b eak o e ed o newly c ea ed
businesses, mic o and small i ms paid highe e ec i e axes han medium and la ge i ms, and his ax
disad an age ampli ied o e ime. Ou analysis highligh s he impo ance o conside ing i m size, age, and
owne ship cha ac e is ics, oge he wi h he e ec i e impac o speci ic ax schemes, in e alua ing he impac
o hese ypes o policies. While many coun ies o e ax incen i es o new and mic o i ms, hese businesses
emain signi ican ly a ec ed by he ax bu den, which pu s hem a a disad an age compa ed o la ge i ms.
17
Re e ences
Acke be g, D. A., Ca es, K. and F aze , G. 2015. Iden i ica ion p ope ies o ecen p oduc ion unc ion
es ima o s. Econome ica, 83(6), 2411-2451.
Bachas, P., B ockmeye , A., Dom, R., and C. Semele , 2023. E ec i e ax a es and i m size. CEPR Discussion
Pape Se ies. DP 17985.
Ba ios, S., Nicodème, G., and Fuen es, A. J. S. 2018. Mul i‐Fac o E ec i e Co po a e Taxa ion, Fi ms’ Ma k‐
Ups and Tax Incidence: E idence om OECD Coun ies. Fiscal S udies, 39(3), 417-453.
Egge , P., S. Lo e z, M. P a e may , and H. Winne , 2009. Fi m-speci ic o wa d-looking e ec i e ax a es.
In e na ional Tax and Public Finance 16, 850-870.
Eu opean Commission, 2022, Di ec o a e-Gene al o In e nal Ma ke , Indus y, En ep eneu ship and SMEs,
Eu opean Inno a ion Council and SMEs Execu i e Agency, Di Legge, A., Ceccan i, D., Ho al Fo onda, F. e
al., Tax compliance cos s o SMEs – An upda e and a complemen – Final epo , Publica ions O ice o
he Eu opean Union.
Kuma , K., Rajan, R., & Zingales, L. 1999. Wha de e mines i m size? NBER Wo king Pape 7208, Na ional
Bu eau o Economic Resea ch.
Lopez-Ga cia, P., and S. Puen e, 2012. Wha makes a high-g ow h i m? A dynamic p obi analysis using
Spanish i m-le el da a. Small Business Economics 39, 1029-1041.
OECD 2015, Taxa ion o SMEs in OECD and G20 Coun ies, OECD Tax Policy S udies nº23, O ganisa ion o
Economic Coope a ion and De elopmen , Pa is.
Spengel, C., P. Hauseme , S. Be gne , R. B äu igam, M.T. E e s, S. Plances, and F. S ei , 2015. SME Taxa ion in
Eu ope - An Empi ical S udy o Applied Co po a e Income Taxa ion o SMEs Compa ed o La ge
En e p ises. Eu opean Commission (CIP P og amme), Mannheim.
Tø slø , T., Wie , L., and Zucman, G. 2023. The Missing P o i s o Na ions. Re iew o Economic S udies, Volume
90, Issue 3, May 2023, Pages 1499–1534,
Zhou, H., and G. de Wi , 2009. De e minan s and dimensions o i m g ow h. SCALES-ini ia i e Scien i ic
Analysis o En ep eneu ship and SMEs, EIM Resea ch Repo s.
18
Table 1. Va iable de ini ions and sou ces
Va iable
De ini ion
Sou ce
A. Dependen a iables
Fi m g ow h
Fi m ope a ing e enue u no e g ow h calcula ed as ollows:
( u no e a +1 - u no e a ) / u no e a .
Own es ima ions
using O bis
B. Fi m and i m size cha ac e is ics
Co po a e ETR
Fi m-le el a iable calcula ed using axa ion da a om O bis,
encompassing bo h cu en and de e ed axes. The calcula ion is
pe o med by di iding axa ion by p o i s and losses be o e axes.
Th ee dis inc se s o co po a e ETRs a e de ined: he i s excludes
nega i e axa ion alues (such as e unds) and loss-making i ms;
he second includes nega i e axa ion alues bu excludes loss-
making i ms; and he hi d includes bo h nega i e axa ion alues
and loss-making i ms. In all se s, he co po a e ETR alues a e
unca ed o lie wi hin he ange o 0 o 1.
Own es ima ions
using O bis
Composi e ETR
I combines capi al and labou ax bu dens based on a p oduc ion
unc ion, wi h weigh s o labou and capi al a ying by i m size,
coun y, and yea . The capi al pa uses he a e age co po a e
ETRs by coun y, i m size, and yea , weigh ed by o al EBITDA a
he same le el. The labou pa uses social secu i y con ibu ion
a es es ima ed om he EUROMOD model, weigh ed by o al
employee expenses a he coun y, i m size, and yea le el.
Own es ima ions
using O bis and
Eu omod
To al asse s
Fi m o al asse s (log).
O bis
Numbe o employees
Fi m numbe o employees (log).
O bis
ROA
Fi m e u n on asse s.
O bis
Tangibili y a io
Fi m a io o angible o o al asse s.
O bis
Le e age
Fi m le e age.
O bis
Fi m age
Fi m age based on he a iable “inco po a ion da e” in O bis.
O bis
Cash a io
Fi m cash and cash equi alen s di ided by o al asse s.
O bis
Newness
Bina y a iable equals o 1 i a i m is no olde han wo yea s; 0
o he wise.
Own es ima ions
using O bis
Fi m size
Ca ego ical a iable o i m size, de ined acco ding o Eu os a 's
classi ica ion based on annual u no e .
Own es ima ions
using O bis
C. Coun y cha ac e is ics
GDP pe capi a
The na u al loga i hm o GDP pe capi a (cu en US$).
Wo ld Bank
GDP g ow h
GDP g ow h (annual %)
Wo ld Bank
In la ion
In la ion, consume p ices (annual %)
Wo ld Bank
Rule o Law
Cap u es pe cep ions o he ex en o which agen s ha e
con idence in and abide by he ules o socie y.
Wo ld Go e nance
Indica o s
19
Table 2. Summa y s a is ics
The able epo s he numbe o obse a ions, he mean and s anda d de ia ion, minimum and maximum
o he main a iables in he analysis. The a iables a e de ined in Table 1 and he sample pe iod is 2008-
2019.
(1)
(2)
(3)
(4)
(6)
Obse a ions
Mean
S d. de ia ion
Min
Max
Fi m g ow h
14,570,208
60.70
198.3
-1
686
Ope a ing e enue u no e
14,570,208
5,225,589
1.40e+08
1
6.24e+10
Co po a e ETR
14,570,208
0.21
0.24
0
1
To al asse s
14,570,208
12.83
2.01
0
26.05
Numbe o employees
14,570,208
1.57
1.31
0
13.19
ROA
14,570,208
-0.02
43.07
-148,738
4,173
Tangibili y a io
14,570,208
0.24
0.29
0
295.23
Le e age
14,570,208
0.96
111.07
-254.01
357,047
Cash a io
14,570,208
0.16
0.57
-1,136
204.30
Fi m age
14,570,208
14.16
12.19
0
814
GDP pe capi a
13,566,821
10.11
0.46
9.04
10.77
GDP g ow h
13,566,821
0.87
2.68
-7.19
8.20
In la ion
13,566,821
1.26
1.31
-1.16
6.21
Rule o Law
14,570,208
0.76
0.42
-0.02
1.55
Newness
14,570,208
0.12
0.33
0
1
Fi m size
14,570,208
1.25
0.59
1
5
20
Table 3. OLS es ima ion o equa ion 1
The able epo s coe icien es ima es and s anda d e o s (in pa en heses) om he OLS es ima ion
o equa ion (1). Dependen a iable is Fi m g ow h. The lowe pa o he able deno es he ype o
ixed e ec s. We clus e he s anda d e o s a he i m le el in all speci ica ions. The ***, **, and *
ma ks deno e s a is ical signi icance a he 1%, 5%, and 10% le el, espec i ely.
(1)
(2)
(3)
(4)
Fi m g ow h
Fi m g ow h
Fi m g ow h
Fi m g ow h
Co po a e ETR
-147.491***
-176.989***
-147.206***
-157.725***
[43.471]
[41.374]
[43.463]
[44.455]
To al asse s
-160.830***
-183.108***
-158.700***
-160.935***
[46.012]
[53.318]
[46.651]
[47.049]
Numbe o employees
-62.509**
-72.523**
-62.084**
-60.758**
[29.425]
[33.280]
[29.356]
[29.428]
ROA
0.011*
0.014*
0.011*
0.011*
[0.006]
[0.007]
[0.006]
[0.006]
Tangibili y a io
33.412
42.083*
35.735
37.310*
[21.947]
[23.873]
[22.747]
[22.622]
Le e age
-0.011
-0.012
-0.010
-0.011
[0.007]
[0.008]
[0.007]
[0.007]
Fi m age
-4.694**
-4.435
[2.045]
[3.007]
Cash a io
17.616**
19.462**
17.975**
17.764**
[8.552]
[9.027]
[8.715]
[8.484]
GDP pe capi a
65.991
[195.830]
GDP g ow h
0.857
[2.769]
In la ion
-0.582
[7.691]
Rule o Law
15.801
[104.326]
Obse a ions
14,570,208
13,566,821
14,570,208
14,570,208
Adjus ed R-squa ed
0.395
0.391
0.395
0.395
Fi m
Y
Y
Y
Y
Coun y-yea
N
N
N
Y
Indus y-yea
N
N
Y
Y
S anda d e o s
Fi m
Fi m
Fi m
Fi m
21
Table 4. Econome ic es ima ion o Figu es 3 and 4
The able epo s coe icien es ima es and s anda d e o s (in
pa en heses) om he OLS es ima ion o he unde lying eg essions
used o cons uc Figu es 3 and 4. The dependen a iable is Fi m
g ow h. The lowe pa o he able deno es he ype o ixed e ec s.
We clus e he s anda d e o s a he i m le el in all speci ica ions.
The ***, **, and * ma ks deno e s a is ical signi icance a he 1%, 5%,
and 10% le els, espec i ely.
(1)
(2)
Fi m g ow h
Fi m g ow h
Co po a e ETR
-74.210***
-9.404
[16.268]
[129.865]
Newness
266.581***
[68.270]
Newness * ETR
-868.016***
[330.123]
Mic o
705.292***
[119.326]
Mic o * ETR
-166.913**
[84.117]
Obse a ions
14,570,208
14,399,859
Adjus ed R-squa ed
0.395
0.198
Fi m Con ols
Y
Y
Fi m
Y
Y
Coun y-yea
Y
Y
S anda d e o s
Fi m
Fi m
22
Table 5. Econome ic es ima ion o Figu e 5
The able epo s coe icien es ima es and s anda d
e o s (in pa en heses) om he OLS es ima ion o he
unde lying eg essions used o cons uc Figu e 5. The
dependen a iable is Fi m g ow h. The lowe pa o he
able deno es he ype o ixed e ec s. We clus e he
s anda d e o s a he i m le el in all speci ica ions. The
***, **, and * ma ks deno e s a is ical signi icance a he
1%, 5%, and 10% le els, espec i ely.
(1)
Fi m g ow h
Co po a e ETR
15.046***
[3.491]
Belgium-Newness * ETR
-49.316***
[15.484]
Spain-Newness * ETR
-258.999**
[131.255]
F ance-Newness * ETR
-8,307.05
[11,929.001]
C oa ia-Newness * ETR
-10.224
[28.523]
I aly-Newness * ETR
-2,058.714***
[598.597]
Poland-Newness * ETR
-61.821**
[25.301]
Po ugal-Newness * ETR
-584.818***
[188.582]
Romania-Newness * ETR
-369.682**
[171.066]
Slo akia-Newness * ETR
-130.167
[99.967]
Obse a ions
14,570,208
Adjus ed R-squa ed
0.395
Fi m Con ols
Y
Fi m
Y
Coun y-yea
Y
S anda d e o s
Fi m
29
